Interactive learning tool
Simple vs. Compound Interest Explorer
Compare simple and compound interest using the same principal, rate, time, and compounding frequency with formulas and a year-by-year table.
Formula review:
Side-by-side result
| Year | Simple amount | Compound amount | Difference |
|---|
This is hypothetical interest math, not a market forecast, APR/APY disclosure, loan amortization schedule, or recommendation.
This educational calculator applies the same starting principal, annual rate, and time to two different models:
- simple interest;
- compound interest.
The goal is to show how the math diverges when interest begins earning interest.
Inputs
Enter a fictional:
- starting principal;
- annual interest rate;
- number of years;
- compounding frequency for the compound side.
The calculator starts blank so no rate is presented as an expected investment return.
Results
The model shows:
- simple final amount;
- simple interest earned;
- compound final amount;
- compound interest earned;
- dollar difference;
- year-by-year comparison.
Formulas
Simple interest
A = P(1 + rt)
Compound interest
A = P(1 + r/n)^(nt)
Where:
- A = final amount;
- P = starting principal;
- r = annual rate as a decimal;
- n = compound periods per year;
- t = years.
The SEC describes compound interest as interest earned on interest.
Fictional example
Enter:
- $1,000 principal;
- 5% annual rate;
- 5 years;
- annual compounding.
The model should return approximately:
- simple amount: $1,250.00
- compound amount: $1,276.28
- difference: $26.28
This is a math example, not an investment forecast.
What the model does not include
This explorer does not include:
- recurring deposits;
- withdrawals;
- taxes;
- fees;
- inflation;
- changing rates;
- market returns;
- payment schedules;
- legal APR/APY calculations.
The narrower scope makes the simple-vs-compound comparison easier to interpret.
Educational boundary
The explorer models hypothetical interest math only. It does not predict returns, value a security, recommend an account or loan, or calculate legally required product disclosures.